I didn't mean "it works" in the sense that it would dramatically improve the team. I've always thought that stripping the captaincy from a player would just create a very awkward situation in the dressing room - leaving one player dejected and maybe creating sympathetic resentment against management or a coach. I should have said more that their example shows that changing captains doesn't ruin the dynamic of a team and they can move on.
Maybe it's just specific to the San Jose situation, though, since they stripped it from Marleau and Thornton and therefore it didn't seem as big a deal. In other team's situations, I could see a player demanding a trade or other internal problems.
I think it would depend on how close the room is.
If I had lost the captaincy I would be disappointed as well. However, if say my best friend was given it instead. I would be genuinely happy for him and wouldn't have any awkwardness. If a teammate whom you're not really close with was given it, it would be awkward...